07 FFL 03 SOT question

[Willie Sutton]

Hopefully addressed to 07 FFL's with Class 3 SOT experience:

Assuming that an incorporated (not individual) 07 FFL with Class 3 SOT has made up a few dealer sample MG's and then gets tired of paying annual ITAR fees and has no intent to continue manufacturing, can he exchange the 07 FL for a 01 FFL, continue to pay for the Class 3 SOT, and as a dealer "not a manufacturer" retain the Post 86 dealer samples he's previously contructed as an 07? The question is, in other words, is the change in the corporate license from a 07 to a 01 considered to be the same entity in posession?

My gut says "Yes" but other qualified opinions are appreciated before I have a lawyer look at it.



Willie

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[dprice3844444]

ask atf

 

[dogtown tom]

Willie Sutton .....Assuming that an incorporated (not individual) 07 FFL with Class 3 SOT has made up a few dealer sample MG's and then gets tired of paying annual ITAR fees and has no intent to continue manufacturing, can he exchange the 07 FL for a 01 FFL, continue to pay for the Class 3 SOT, and as a dealer "not a manufacturer" retain the Post 86 dealer samples he's previously contructed as an 07? The question is, in other words, is the change in the corporate license from a 07 to a 01 considered to be the same entity in posession?

My gut says "Yes" but other qualified opinions are appreciated before I have a lawyer look at it.

Although it's the same business "entity".....it's not the same FFL.

1. You can't "exchange" an 07 for an 01......you have to submit a new application and pay for a new SOT.
2. Transfer of post '86 machine guns requires a "LE demo letter" for 01FFL/SOT's.
3. If you give up your 07FFL you'll have to transfer all firearms on a Form 3 to your new 01FFL......then you send in all of your records from the 07 that are less than twenty years old.

 

[Willie Sutton]

^^ This is the likely the answer, thanks.

The question, to frame it simply, is "Can a FFL can be changed from one category to another while retaining the same license number".

If so, then it's one outcome.

If not, then it's another, which is the outcome you suggest is the case.

I'm well familiar with LE Demo letters, etc., and the procedures for transfer between licenses.


The other branch to explore in this case is if the 07 stops manufacturing but retains the license, can it stop paying ITAR? That would allow the same license to retain the demos without needing to trasnfer them out. The bottom line is that there are a dozen demos in the hands of the 07, nothing has been made in two years, and he wants to stop paying the ITAR while keeping the demos. There's no real market for them, so it's either keep them one way or another without paying ITAR or bandsaw them and sell the parts sets.


Any other input from any qualified readers?

Thanks,

Willie

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[medalguy]

I'm not sure BATF would allow an 07 license if the licensee has no stated intention of manufacturing. Just my guess based on my past experience with the agency.

 

[Willie Sutton]

^^

The 07 is often held by gunsmiths who do not actually manufacture receivers but rather who assemble complete firearms from previously manufactured receivers, which activity does not require ITAR registration. Sticking together the odd custom Mauser and a handful of AR builds is "manufacturing". In addition you can manufacture sporting shotguns from scratch on an 07 without paying the ITAR.



Willie

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[dogtown tom]

Willie Sutton ....The 07 is often held by gunsmiths who do not actually manufacture receivers but rather who assemble complete firearms from previously manufactured receivers, which activity does not require ITAR registration.....

This describes a manufacturing activity and definitely DOES require ITAR registration: https://www.atf.gov/regulations-rulings/rulings/atf-rulings/atf-ruling-2010-10.htm

You are muddling "gunsmithing" and "manufacturing". Who actually manufactured the receiver is immaterial.

Example: Assembling a customer provided receiver, parts kit, upper and barrel into a complete firearm..........gunsmithing.

Example: Assembling complete firearms from AR lowers, uppers, barrels and parts that the gunsmith owns.....manufacturing.

 

[Arizona_Mike]

^^

The 07 is often held by gunsmiths who do not actually manufacture receivers but rather who assemble complete firearms from previously manufactured receivers, which activity does not require ITAR registration. Sticking together the odd custom Mauser and a handful of AR builds is "manufacturing". In addition you can manufacture sporting shotguns from scratch on an 07 without paying the ITAR.



Willie

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In fact I think this is what the FFL I spoke to some time ago (about whom I was asking a question about ITAR fees here that got me an infraction) does.

ITAR seems to be some complicated that forum regulars and industry professionals don't understand it.

Mike

PS. I learned my lesson. Nothing personal Willie, but since I quoted you I have to add a disclaimer to my post that if you are wrong, you're naughty.

 

[Willie Sutton]

"ITAR seems to be some complicated that forum regulars and industry professionals don't understand it."


It's complex enough that in my real job I hire a professional service to make sure I am compliant (My company is a registrant under the arms control act). The FFL question is for a different entity and in a different area of the law.


"Example: Assembling complete firearms from AR lowers, uppers, barrels and parts that the gunsmith owns.....manufacturing."

Agreed 100%, and that's always been the case, and what is intended to be done. The question isn't what BATFE says is manufacturing. The *question* is if the Dept of State considers the activity of installing parts into a lower to be one that requires ITAR fees to be paid or not. The BATFE isn't the one that answers questions on that point, they refer you to the Department of State. Good luck getting an answer from State because *they* don't understand it themselves.

My belief is that as far as the STATE DEPARTMENT is concerned, manufacturing FIREARMS other than sporting shotguns requires ITAR. If an entity purchases fully machined lowers, State does not (likely) consider that second operation to be "Manufacturing Firearms" because the term "Firearm" as defined under federal law has nothing to do with actual operability, but merely the fabrication of the serialized portion.

Following that:

If a corporation is simply completing lowers that are purchased fully machined by another vendor, then the argument to the State Department is that the ITAR-required process using the definition of a "firearm" under federal law has already been done when the lowers are received by the "entity completing assembly, who is licensed as a manufacturer by the BATFE, but who in fact is not manufacturing a "firearm" because the lowers were already papered and transferred as a firearm when received for completion. It would then follow that the second-operation entity "possibloy" does not require ITAR registration.


I guess it's about time to contact an attorney for an opinion.



Willie

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